By Zhu Junsheng, Research Institute of Finance, DRC

Research Report No. 26, 2017 (Total 5101) 2017-2-28

Abstract: The agricultural insurance business model in China is featured by relying on the relevant departments to promote government projects in underwriting household-based insurance claim, which have, however, resulted in high costs and instances in breach of regulations, and led to the damage of farmers’ interests, and the detraction of government’s policy goal to scatter agricultural risks through agricultural insurance. The root cause of the problems in the agricultural insurance business model lies in the fact that China's small scale decentralized farming is essentially incompatible with the traditional agricultural insurance products. The government needs to establish an inclusive agricultural insurance system and replace the traditional agricultural insurance products with index insurance, so as to realize the innovation of agricultural insurance business model. In order to promote the innovation of agricultural insurance business model, the government needs to increase financial support, incorporate the index insurance into central government subsidies, construct inclusive agricultural insurance system to provide farmers the basic guarantee for risk prevention, promote the development of infrastructure construction relating to index insurance, and reduce the system risks connected with agricultural insurance business model innovation.

Key words: agricultural insurance, business model, index insurance, inclusive